THE KESHAV MILLS CO. LTD. versus COMMISSIONER OF INCOME-TAX, BOMBAY NORTH

THE KESHA V MILLS CO. LTD.

COMMISSIONER OF INCOME-TAX, BOMBAY NORTH

February 8, 1965

[P. B. GAJENDRAGADKAR, C.J;, K. SuBBA RAo,

K. N. WANCHOO, M. HIDAYATULLAH, J.C. SHAH, S. M. S!KRI AND R. S. BACHAWAT, JJ.]

Indian Income-tax Act (11 of 1922), s. 66(4)-Power of High Court to mk Tribunal to submit supplementary statement of case after further investigation of facts-Stare decisis-Power of Supreme Court to review and revise earlier judgments-'W_hen should be exercised.

The appellant was company registered in the erstwhile Baroda State. In connection with the assessment year 194243 the Income-tax Officer Ahemdabad held that certain sale proceeds were received by the appellant in British India and the profit thereon was taxable under the Indian Income-tax Act, 1922. One of the items in dispute related to the sale-proceeds collected by collecting cheques on British India Sbroffs and Merchants. In respect of the said item the Appellate Assistant Com-missioner as well as the Appellate Tribunal decided against the appellant, and thereafter, reference was made to the High Court. The High Court felt that it required further facts to decide the reference and twice remanded the case to the Tribunal for investigation of those facts. The Tribunal after takinjl evidence submitted supplementary Statement of Case on each occasion. Finally the High Court decided the question against the appellant, but granted it certificate of fitness to appeal to the Supreme Court.

It was contended on behalf of the appellant that the High Court had no jurisdiction to direct the Tribunal to collect additional material and make it part of the supplementary Statement of Case under s. 66( 4 fas had been decided by this Court in··. the cases of the Petlad Co. and the New Jahangir Mills. On behalf of;:the Revenue it w.S contended that these two cases required reconsideration. The Court therefore had to consider whether it should review and revise its earlier view taken in the said two cases.

· HELD : (i) The JYiew contended. for on behalf of the Revenue namely, that the High Court had power to ask the Tribunal to investigate further facts and submit supplementary Statement of Case was reasonably possible vi~w. But on the other hand the opposite view taken by this Court in the Petlad Co. case and the New Jahangir Mi/18 case was also reasonably possible. The latter view had been follow-ed by this Court on several occasions and it had regulated the pro-cedure in reference proceedings in the High Courts ever since the decision in the New Jahangir Mills case was pronounced. Besides, no reported decision had been cited at the bar where the question about the construc-tion of s. 66( 4) was considered and decided in favour of the view con-tended for by the Revenue; No case therefore was made out for re-vision or review of the Court's•decisions in the Pet/ad Co. and New Jahangir Mills cases. [928 C-F1

Case law discussed.

The New Jahangir Vakil Mills Ltd. v. Commissimter of Income-tax, Iiombizy North, .. {1960] 1 S.C.R. 249 and The Pet/ad Turkey Red Dye

Works Co. Ltd. Pet/ad v. Commissioner of Income-tax, Bombay, A.he,,,,U,.. bad, [1963] Supp. 1 S.C.R. 871, affirmed.

(ii) The principle of stare decisis cannot be pressed into service In cases where the power of this Court to reconsider and revise its earlier decisions is invoked, because that power is inherent in this Court; but wvertheless the normal principle that judgments pronounced by !hi~ Court would be final cannot be ignored. Unless considerations of subo-B tantial and compelling character make it necessary to do so this Court should and would be reluctant to review and revise its earlier decisions. [923 B-Dl

Bengal Immunity Company Ltd. v. State of Bihar [1955] 2 S.C.R. 603, distinguished.

(iii) If the Court is satisfied that its earlier decision was clearly erroneous, it should not hesitate to correct the error; but before previous decision is pronounced to be plainly erroneous, the Court must be satis-fied with fair amount of unanimity amongst its members that revision of the said view is fully justified. It is not possible or desirable, and in any case it would be inexpedient to lay down any principles which should govern the approach of the Court in dealing with the question of reviewing and revising its earlier decisions. It would always depend upon several relevant considerations-What is the nature of the infirmity or error on which plea for review and revision of the earlier view is based ? On the earlier occasion, did some patent aspects of question 1'1>-main unnoticed, or was the attention of the Court not drawn to any rele-vant and material statutory provision, or was any previous decision of this Court bearing on the point not noticed ? Is the Court hearing such plea fairly unanimous that there is such an error in the earlier view? What would be the impact of the error on the general administration of law or on public good ? Has the earlier decision been followed on suboe· quent occasions either by this Court or by the High Courts ? And, would the reversal of the earlier decision lead to public inconvenience, hardship or mischief ? These considerations become still more significant when the earlier decision hal'J>CUS to be unanimous decision of Bench of 11ve learned Judges of this Court. [922 B-F]

CML APPELLATE JURISDICTION: Civil Appeal No. 1017 of

Appeal from the judgment and order dated March 30th and 31st, 1960 of the Bombay High Court in Income-tax Reference No. 2 of 1949.

N. A. Palkhivala and I. N. Shroff, for the appellant.

C. K. Daphtary, Attorney-General, R. Ganapathy Iyer, R. H. Dhebar and R. N. Sachthey, for the respondent.

The Judgment of the Court was delivered by

Gajendragadkar, C.J. When this appeal was argued before Division Bench of this Court on October 23, 1964, it was urged on behalf of the appellant, the Keshav Mills Co. Ltd., that fo view of the present decisions of this Court in The New Jehangir

Vakil Mills Ltd. v. The Commissioner of Income-tax, Bombay North, Kutch and Saurashtra('), and The Petlad Turkey Red Dye Works Co. Ltd., Petlad v. The Commissioner of Income-tax, Bombay, Ahmedabad('), the appeal must be allowed and the case sent back to the Bombay High Court for disposal in accOrd-ance with the principles laid down in the latter decision. At that stage, the learned Attorney-General for the respondent, the COmmissioner of Income-tax, Bombay North, Ahmedabad, urged that he wanted this Court to reconsider the said two decisions. He fairly conceded that if the said two decisions wem to be followed, the appeal would have to be allowed and sent back as suggested by the appellant. The learned Judges constituting the Division Bench took the view that an opportunity should be given to the learned Attorney-General to press his contention, and so, they directed that the appeal be placed before Bench of five Judges. Thereafter, this appeal came on for hearing before the Constitution Bench on November S, 1964. On this occasion again, the same contentions were raised on behalf of the appellant and the respondent respectively. Mr. Palkhivala for the appellant urged that it would be inappropriate to reconsider the recent deci-sions on which he relied, and he argued that on the merits, the view taken by this Court in the said two decisions was sound and correct. On the other hand, the learned Attorney-General contended that he wanted this Court to reconsider the said two I: decisions, and he pointed out that the matter was of importance, and so, the appeal shoµld be referred to larger Bench in view -Of the fact that the decision in the case of the Petlad Co. ([1]) was unanimous decision of Bench consiSting of five Judges of this Court. It was under these circumstances that the Court directed that the appeal should be placed before Special Bench of seven Judges. That is how it has come on for final dcci-·sion before Bench of seven Judges; and the only point which has been raised for the decision of the Special Bench is whether the two decisions in question should be reviewed and revised.

Let us begin by stating the relevant facts leading up to the main point of controversy between the parties. The appellant is company registered in the Baroda State as it then was. The assessment year with which the proceedings giving rise to this appeal are concerned is 1942-43 (the accounting year being -calendar year 1941 ) . During the said year, the appellant was 'non-resident'. It carried on business of manufacturing and

(1) (1960) I S. C. 1l. 249.

(2) (1963) Supp. 1 S. C. ll. 871.

·selling textile goods in the Baroda State. The operations in relation to all sales of goods manufactured by the appellant's Mills were completed at the appellant's premises at Petlad on the footing of ex-Mill delivery in every case.

It appears that on March 22, 1947, the Income-tax Officer, E.P.T. Circle, Ward B, Ahmedabad, passed an order under sec-tions 23 (3) and 34 of the Indian Income-tax Act, 1922 (No. 11 of 1922) (hereinafter called 'the Act') and held that sale pro-ceeds in respect of the sales aggregating each of the following th!ee items were received by the appellant in British India. These items were:

(i) Sal.,.procecds actually received in the accounting Year through M/s 1•1· moh•ndas Ramanlal & Co.

Ri. 12,68,460

(ii) Sal.,.procoeds throush British Indian •Banks throullh Drafts: . . . . . . Rs, 4,40,878

(iii) Salo procoeds collected by collcctin~ choquoa on British Indian Banko and Hundis on British Indian Shorft's and Morchanta .. Rs. 6,71,735

It is with this last item that the present appeal is concerned.

Aggrieved by the order thus passed by the Income-tax Officer, the appellant preferred an appeal before the Appellate Assistant Commissioner of Income-tax, Ahmedabad Range. The Appellate Authority held that the Income-tax Officer was in error in not excluding items (i) aqd (iii) respectively from computation of the taxable profits of the appellant. Thus, the appellant succeed-ed before the appellate authority in respect of the item in dispute.

This decision of the ,appellate authority led to two cross-appeals, one by the Income-tax Officer and the other by the appellant before the Income-tax Appellate Tribunal-hereafter called the Tribunal. The Tribunal dismissed the appellant's appeal in respect of Rs. 4,40,878/- and allowed the Income-tax Officer's appeal in part and held that the item of Rs. 12,68,460/-had been wrongly excluded by the Appellate Authority. In respect of item (iii) relating to Rs. 6,71,735/-, the Tribunal hcld that in the circumstances of the case the sale proceeds represented by the .said item were not received in British India but in the State itself.

This decision of the Tribunal led to two cross-applications by the appellant and the Income-tax Officer for raising tlle ques-tions of law before it in rdation to the items in respect of wkich

they had respectively failed. As result of these proceedin~, the Tribunal drew up the statement of the case on November 5, 1948, and raised the following question to the Bombay High Court:-

As result of these proceedin~,

"Whether on the facts and in the circumstances of the case, the sums of Rs. 12,68,460/-, Rs. 4,40,878/-and Rs. 6,71,735/-, or any of them, which represents receipts by the assessee company of its sale-proceeds in British India, include any portion of its income in British India?"

In other words, all the three items in dispute between the appeal-lant and the Income-tax Officer formed the subject-matter of the question raised by the Tribunal before the Bombay High Court. This reference was registered as Income-tax Reference No. 2 of 1949.

By its judgment and order delivered on the 14th/15th Sep-tember, 1949, in relation to items (i) and (ii) the High Court held that the two sums in question were not debts due from British Indian Merchants but sale proceeds of the goods sold by the appellant to merchants in British India and that such sale proceeds were received by the appellant in British India. In other words, the answers rendered by the High Court in respect of the said two items were against the appellant The appellant came to this Court in appeal against the decision of the High Court, but its appeal failed and the view taken by the High Court was affirmed ( vide Keshav Mills Ltd. v. Commissioner of Income-tax, Bombay)('). In the result, the controversy between the appellant and the Income-tax Officer in respect of the said items has been finally decided against the appellant.

Reverting then to item (iii) with which the present appeal is concerned, the High Court took the view that before it could render an answer to the question in relation to the said item, it would like the Tribunal to furnish to the High Court further facts. Accordingly, the High Court directed that the Tribunal should submit supplementary statement of case and state therein as to whether there was any arrangement or agreement between the Assessee and the merchants that the giving of cheques or hundis by the merchants to the Assessee would result in an uncondi-tional discharge of the liability of the merchants. The High Court also issued some other directions asking the Tribunal to clarify

(I) (1953] S. C. R .. 950.

KESHAV MILLS v. C.I.T. (Gajendragadkar, C.J.)

some of its :relevant findings which appeared to the High Court to be somewhat confused.

As result of this order, the case went back to the Tribunal which in tum remanded it to the Income-tax Officer for getting the requisite information. On receiving the report of the Income-tax Officer, the Tribunal submitted its Supplementary Statement of Case to the High Court on August 13, 1954.

Whilst these proceedings were thus pending in the High Court,

the decision of this Court in The Commissioner of Income-tax, Bombay South, Bombay v. Messrs. Ogale Glass Works Ltd., Ogale Wadi(') was pronounced. In that case, one of the points which arose for decision was whether the Post Office which takes the cheque from the sender to the addressee is the agent of the sender or the addressee; and on this point, the Court held that as between the sender and the addressee, it is the request of the addressee that makes the post-office, the agent of the addressee and after such request, the addressee cannot be heard to say that the post-office was not his agent. On the other hand, if there is no such request by the addressee, express or implied, then on delivery of the letter or the cheque to the post office by. the sender, the post-office acts as the agent of ,the sender. This decision had significant impact on the further progress of the present dispute.

After receiving the Supplementary Statement of Case from the Tribunal, the mattc;r was argued before the High Court on the 15th February, 1955. On this occasion, the High Court referred the matter back again to the Tribunal with the direction : "that the Tribunal will determine on the evidence led by both i' parties whether the sum in question was paid by various merchants by sending drafts, hundis or cheques by post and that if the Tri-bunal found that in some cases the amount was not sent by post, then the Tribunal should determine what amount was sent other-wise than by post and the Tribunal should then submit Supple-mentary Statement of the Case". It would be noticed that this direction was given by the High Court obviously because the High Court wanted to deal with the question referred to it in the light of the decision of this Court in the case of Ogale Glass Works Ltd. ( '). In fact, in giving this second direction, the High Court observed that when it had called for the first Suprlementary State-ment of the Case, it did not have the benefit of the decision of this Court in the case of Ogale Glass Works Ltd., ([1]) and that after the said decision was pronounced, the position with regard (I} (1955] l S. C.R. 185.

.to receipt of the cheque by the appellant had been considerably simplified.

Pursuant to the second order of remand made by the High Court, the Tribunal submitted its second Supi)lementary State-ment of the Case on the 26th October, 1959. After receipt of the second Supplementary Statement, the Reference again came up for hearing before the High Court. After hearing the parties, the High Court has rendered its answer against the appellant on the question in relation to the item in dispute. It is against this order passed by the High Court on the 30th and 31st March, 1960, that the appellant has come to this Court with certificate granted by the High Court; and on its behalf, Mr. Palkhivala has urged that in view of the decisions of this Court in the New J ehangir Mills(') case and Petlad Co.(2) case, the appeal must be allowed and the case remitted to the High Court to be dealt with in accordance with the principles laid down by this Court in the latter case.It is common ground that as result of the two orders of remand passed by the High Court in the present Reference pro-ceedings, some material evidence which was not on the record when the question was framed by the Tribunal and sent to the High Court under s. 66( 1) of the Act, has been collected and made part of the Supplementary Statement of the Case; and basing himself on this fact, Mr. Palkhivala contends that the High Court had no jurisdiction to direct the Tribunal to collect additional material and form it part of the Supplementary State-ment under s. 66 ( 4) of the Act. It is in support of this conten-tion that reliance ill placed on the two decisions in question. Before addressing ourselves to the problem as to whether the view taken by this Court in the said two decisions needs to be reconsidered and revised, it is necessary that we should refer to the said two decisions as well as other decisions on which both the parties have relied before us in the course of the arguments.

The first decision on which Mr. ·Palkhivala relies is the New Jehangir Mills(') case. In that case, the question which was referred by the Tribunal to the High Court was whether the receipt of the cheques in Bhavnagar amounted to receipt of sale-proceeds in Bhavnagar. Before rendering its answer to this ques-tion, the High Court had directed the Tribunal to furnish "Supplementary Statement of the Case on the following points :-

"On the finding of the Tribunal that all the cheques -~received in Bhavnagar, lhe Tribunal should find

(2) (1963] Supp. I S. C.R. 871.

what portion of these cheques were received by post, whether there was any request by the assessee, express or implied, that the amounts which are the subject-matter of these cheques should be remitted to Bhav-nagar by post".

It would be noticed that as result of this direction, the question which would really have to be considered by the High Court would be whether the posting of the cheques in British India at the request, express or implied, of the appellant, amounted to receipt of sale-proceeds in British India. It was urged by the appellant in that case that as result of the direction issued by the High Court calling for supplementary "statement of the case, the nature of the question formulated by the Tribunal had· been altered, and that was beyond the competence of the High Court under s. 66 ( 4). In substance, this plea was upheld by this Court and it was held that in calling for the supplementary state-ment of the case, the lligii Court had misconceived its powers under s. 66 ( 4) of the Act According to this decision, s. 66 ( 4) must be read with s. 66 ( 1) and s. 66 (2), and so read, it did not empower the High Court to raise new question of law which did not arise out of the Tribunal's order or direct the Tribunal to investigate new and further facts necessary to deter-mine the new question which had not been referred to it under s. 66(1) ors. 66(2) of the Act and direct the Tribunal to submit supplementary statement of case. The additions and alterations in the statement of case which can be directed under s. 66 ( 4) could, in the opinion of this Court relate only to such facts as already formed part of the record but were not included by the Tribunal in the statement of the case. Mr. Palkfilvala contends that in the light of the decision, we ought to hold that in so far as the two orders of reinand passed by the High Court in the present Reference proceedings have led to the collection of additional material and evidence and their inclusion in the supplementary statemCQts of the case, the High Court has exceed-ed its jurisdiction under s. 66 ( 4).

The other case on which Mr. Palkhivala strongly relies is the decision of this Court in the Pet/ad Co. Ltd.(')·. In that cas.e. one of the points decided by this Court had reference to the extent of the powers and authority of the High Court under s. 66( 4). It was held that though the High Court had power to direct &upplemental statement to be made, it was beyond its competence .to direct additional evidence to be taken. In other

(I) (1963] Supp. 1 S. C.R. 871.

words, this Court took the view that when the High Court makes an order of remand under s. 66( 4) and directs the Tribunal to furnish supplemental statement of the case, it can require the Tnbunal to include in such supplemental statement material and evidence which may already be on the record, but which had not been included in the statement of the case initially made under s. 66 (1). The result of this decisioµ is that s. 66 ( 4) does not confer on the High Court power to require tho Tribunal to take additional evidence before it renders its answers on the questions formulated under s. 66(1) ors. 66(2). In accordance with the view thus taken by this Court, the direction issued by the High .Court to submit supplemental statement of the case after taking .additional evidence was reversed, and following the precedent in the New Jehangir Mills(') case, an order was passed that the appeals should be allowed and the matter remitted to the High -Court to give its decision on the question of law referred to it as required under s. 66( 5) of the Act.

Before the decision of this Court in the Pet/ad Co. Ltd.(') o was pronounced, similar point had been raised in the case of M/s. Zoraster and Co. v. The Commissioner of lncome-t~. Delhi, Ajmer, Rajasthan and Madhya Bharat (now Madhya Pradesh)('). In this latter case, the question referred to the High Court for its decision was whether on the facts and circums-tances of the case, the profits and gains in respect of the sales J: made to the Government of India were received by the assessee in the taxable territories ? While dealing with this question, the High Court thought it necessary to remand the case to the Tribunal for supplemental statement of the case calling for finding on the question whether the cheques were sent to the assessee firm by post or by hand and what directions, if any, had the assassee firm given to the department in the matter ? The validity and correctness of this direction was challenged by the appellant before this Court in view of the decision of this Court in the case of New Jehangir Mills('). While dealing with this objection raised by the appellant, this Court held that the question as it was framed, was wide enough to include an enquiry as to whether there was any request, express or implied, that the amount of the bills be paid by cheques so as to bring the matter within the dicta of this Court in the Ogale Glass Works(') case or in Shri Jagdish Mills Ltd. v. The Commissioner of lncome-t~. Bombay North, Kutch and Saurashtra, Ahmedabad([6 ]) and since it did not appear

(I) [1960] I S. C. R. 249.

(2) [1963] Supp. I S. C.R. 871.

(3} (1961) l S. C.R. 210.

(4} (19SS] 1S.C.R.185.

(S) (1960] I S. C. R. 236.

ftoJn die . or.dcr . of remand passed by the High Coun that the High Court intended that the Tribunal should admit fres~ evidence Wore submitting its supplemental statement, the impugned direction could not be said to be invalid. This decision shows that when question is framed for the decision of the High Court in wide terms, and the High Court finds that before rendering its answer on the said question some new aspects have to be con-sidered and it feels that for dealing with the said new aspects of the matter, .supplemental statement of the case should be called for, the Hjgh Court is authorised to call such supplemental statement, provided, of course, the High Co_urt does not require the Tribunal to collect additional material or evidence before submitting its supplemental statement.The same view has been expressed by this Court in the case of Commissioner of Income-tax, Madras v. M. Ganapathi Muda-lit11'('). According to this decision, supplementary statement of case may contain such alterations or additions as the High O>urt may direct, but the statement must necessarily be based on facts which are already on the record. While exercising its jurisdiction under s. 66 ( 4), the High Court has no power to ask for fresh statement of case with direction that the Tribunal should go into the matter again and record further evidence.

Th.etc is one more decision to which reference may inciden-tally be made before we part with the series of decisions on which Mr. Palkhivala relies. In the Commissioner of Income-tax, Bombay v. The Scindia Steam Navigation Co. Ltd.,(') this Court had occasion to consider the scope and denotation of the expres-s.ion "any question of law arising out of such order" occurring in s. 66(1) of the Act. The majority decision has summed ap the result of the discussion as to the scope and effect of the provi-lions of s. 66 in these words :

(1) When question is raised before the Tribunal and is dealt with· by it, it is clearly one arising out of its order.

(2) When question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it, and is, therefore, one arising out of its order.

(3) When question is not raised before the Tribunal but the Tribunal deals with it, that will also be question arising out of.its order.

( 4) When question of law is neither raised before the Tribunal. nor considered by it, it will not be question arising (t) (1964] 53 11.T.R. 623. (2) (1962} I S. C.R. 788.

out of its order notwithstanding that it may arise on the findings given by it.

In substance, these propositions mean that it is only ques-tion that has been raised before or decided by the Tribunal that could be held to arise out of its order.

Let us now refer to the decisions on which the learned Attorney-General has relied in support of his contention that the High Court has power under s. 66 ( 4) to call for new additional evidence if it takes the view that such additional evidence is necessary to enable it to determine the question raised for its decision satisfactorily. The learned Attorney-General has fairly conceded that he has not been able to find any ~ecision where this question has been answered in favour of the view for which he contends after construing the relevant provisions of s. 66 ( 4) of the Act. He, however, urges that there is high authority in support of the practice for which he contends inasmuch as the Privy Council appears to have assumed that the High Court can, 0 in exercise of its powers under s. 66 ( 4), call for additional evid-ence. The first decision of the Privy Council on which he relies is in the case of (Sir Sunder Singh Majithia v. The Commissioner of Income-tax, C.P. & U.P.(' ). In that case, two of the questiom which arose were : whether the steps taken by the assessee to vest in his wife and sons an interest in the inunovable assets of the business were not legally effective, e.g., for want of regis-tered instrument of transfer; and if the factory, land and buildings in question were joint family property, whether it was shown that partition at the hands of the father of the said properties could not be effected without written instrument ? The question of law formulated for the decision of the High Court was : "In all the circumstances of the case, having regard to the personal law governing the assessee and the requirements of the Transfer of Property Act (IV of 1882) and the Stamp Act (II of 1899), has the deed of partnership dated February 12, 1933, brought into existence genuine firm entitled to registration under the provisions of s. 26-A of the Act?" While answering this ques-G tion, one of the points which had to be decided was whether the inunovable properties were the self-acquisitions of the father or not. The Privy Council took the view that before satisfactory answer could be rendered on the question framed, several facts had to be ascertained, and in its judgment the Privy Council has indicated the nature of these facts. "It is necessary to know", says the judgment, "as regards (a) the business, machinery, plant

(I) {1942] 10 I.T.R. 457.

and other movables; (b) the factory bulldinp and land wbethcr they were before 1931 the self-acquired property of the father or his ancestral property or joint family property or whother they fall into some other and what category according to the cuatomary law". The judgment also points out that the rights of the mem-bers of the family in respect of the said property would have to be ascertained and the conduct of the parties comidered. 'Iben, in regard to the agreement in question, the Privy Council pointed out that it would be necessary to enquire what agrcmnont, if any, was made prior to February 12, 1933, and when as to partner· ship being constituted to carry on the sugar factory and as to the assets which it was to have as firm. "None of these essential facts", says the judgment, "have been found and stated by the Commissioner, with the result that the question referred cannot be answered until the High Court has exercised its powers under sub-section ( 4) of section 66 of the Act". Having made thme observations, the Privy Council left it to the discretion of the High Court to specify the particular additions and alterations which the Commissioner should be directed to make. In the result, the advice tendered by the Privy Council was "that the case be remanded to the High Court for disposal after taking such action under sub-section ( 4) of s. 66 of the Act as the High Court may think fit in the light of this judgment". The argument is that r. the facts which the Privy Council thought it necessary to ascer-tain before answering the question, indicate that they could not have been on the record at the time when the question was origi-nally framed by the Commissioner, and so, the suggestion is that inasmuch as the Privy Council indicated that the High Court should call for supplemental statement in regard to facts which were apparently not already on the record, this decision should be taken to support the contention that s. 66( 4) authorised the High Court to call for new additional material before it renders its answers to the questions formulated under s. 66(1) or s. 66(2).

similar argument is based on another decision of the Privy Council in Trustees of the Tribune Press, Lahore v. Commissioner of Income-tax, Punjab, Lahore('). In that .case, the questions which were referred to the High Court were : "(I ) whether the income of the Tribune Trust was liable to be assesaed in the hands of the Trustees under the provisions of the Income-tax Act ?· and (2) if it was, whether it was not exempt under s. 4(3)(1) ci the Act?" In the High Court, there was sharp di1ference .of opinion between the Judges who heard the reference; but ultimately the

u Sup./65-13

1111Wen went against the Tribwie, and so, the dispute was taken to the Privy Council by the Trustees of the Tribune Trust. At the first hearing of the said appeal before the Privy Council, it was consi.dcrcd by the Board to be desirablo that the powers conferred by aub-s. 4 of a. 66 of tho Act should be employed to obtain further information. Accordingly, by an Order in Council, dated July 29, 1937, it was directed in accordance with the advice tendered by the Board that tho case ought to be remitted to the High Court of Judicature at Lahore with direction that the said High Court shall refer the case back to the Commissioner under s. 66(4), first for tho addition of such facts during tho life-time of tho testator Sardar Dayal Singh as may bear upon the proper intoiprctation of tho expression 'keoping up the liberal policy of the said newspaper' in clallSO XXI of the will of tho said testator datod the 15th Day of Juno, 1895, and sccondty, for the addition of such facts as to compromise dated the 1st day of Doccmber, 1906, as may show whether the said compromiso is binding on all parti.os interested in the estate of the said testator. Thcrcaftor, 0 supplcmontary statement made by the Commissioner was filed and it appears that before ho made the said statement, the Com-missioner "carefully assembled considerable material explana-tory of the direction given by the testator in the phrase 'keeping up tho liberal policy of the said newspaper', and showing as their Lordships think, very fairly, the nature and purpose of the trust". I: After considering tho said material, the Privy Council allowed tho · appeal preferred by tho Trustees, because in its opinion tho second question framed for ~o decision of the High Court had to be answered in favour of tho assessee. It is urged that this decision also shows that tho Privy Council called for additional material and evidence by requiring the High Court to exercise its powers in that behalf under s. 66 ( 4) of the Act.

The learned Attorney-General also stated that there were some other decisions of the High Courts in India where similar additional evidence had been called for by the High Courts under s. 66( 4), and by way of illustration, he cited before us the decision of the Bombay High Court in Messrs. Govindam Bros. Ltd. v. Com-miuioner of Income-tax, Central, Bombay([1]). It is, however, clear that in none of the decisions on which the learned Attomey-General relics has the question about the construction of s. 66(4) been argued, considered· and decided. That, broadly stated, is tho position disclosed by tho judicial decisions bearing on the point with which we are concerned in the present appeal.

(I} (II*! 14 L T.JL 7'4.

In dealing with the question as to whether the earlier decisions of this Court in the New Jehangir Mills(') case, and the Pet/ad Co. Ltd.([2 ]) case should be reconsidered and revised by us, we ought to be clear as to the approach which should be adopted in such cases. Mr. Palkhivala has not disputed the fact that in proper case, this Court has inherent jurisdiction to reconsider and revise its earlier decisions, and so, the abstract question as to whether such power vests in this Court or not need not detain us. In exercising this inherent power, however, this Court would naturally like to inipose certain reasonable limitations and would be reluctant to entertain pleas for the reconsideration and revision of its earlier decisions, unless it is satisfied that there are compelling and substantial reasons to do so. It is general judicial experience that in matters of law involving questions of construing statutory or constitutional provisions, two views are often reasonably possible and when judi-cial approach has. to make choice between the two reasonably possible views, the process of decision-making is often very difficult and delicate. When this Court hears appeals against decisions of the High Courts and is required to consider the propriety or correct-ness of the view taken by the High Courts on any point of law, it would be open to this Court to hold that though the view taken by the High Court is reasonably possible, the alternative view which is also reasonably possible is better and should be preferred. In such case, the choice is between the view taken by the High Court whose judgment is under appeal, and the alternative view which appears to this Court to be more reasonable; and in accept-ing its own view in preference to that of the High Court, this Court would be discharging its duty as Court of Appeal. But different considerations must inevitably arise where previous decision of this Court has taken particular view as to the construction of statutory provision as, for instance, s. 66 ( 4) of the Act. When it is urged that the view already taken by this Court should be re-viewed and revised, it may not necessarily be an adequate reason for such review and revision to hold that though the earlier view is reasonably possible view, the alternative view which is pressed on the subsequent occasion is more reasonable. In reviewing and revising its earlier decision, this Court should ask itself whether in the interests of the public good or for any other valid and com-pulsive reasons, it is necessary that the earlier decision should be revised. When this Court decides questions of law, its decisions are, under Art. 141, binding on all courts within the territory of India, and so, it must be the constant endeavour and concern of

(2) [t963) Supp. t S.C.R. 871.

this Court to introduce and maintain an element of certainty and continuity in the interpretation of law in the country. Frequent exercise by this Court of its power to review its earlier decisions on the ground that the view pressed before it later appears to the Court to be more reasonable, may incidentally tend to make law uncertain and introduce confusion which must be consistently avoided. That is not to say that if on subsequent occasion, the Court is satisfied that its earlier decision was clearly erroneous, it should hesitate to correct the error; but before previous decision is pronounced to be plainly erroneous, the Court must be satisfied with fair amount of unanimity amongst its members that revi-sion of the said view is fully justified. It is not possible or desir-c able, and in any case it would be inexpedient to lay down any principles which should govern the approach of the Court in deal-ing with the question of reviewing and revising its earlier decisions. It would always depend upon several relevant considerations :-What is the nature of the infirmity or error on which plea for review and revision of the earlier view is based ? On the earlier occasion, did some patent aspects of the question remain unnoticed, or was the attention of the Court not drawn to any relevant and material statutory provision, or was any previous decision of this Court bearing on the point not noticed ? Is the Court hearing such plea fairly unanimous that there is such an error in the earlier view ? What would be the impact of the error on the general administration of law or on public good ? Has the earlier decision been followed on subsequent occasions either by this Court or by the High Courts ? And, would the reversal of the earlier decision lead to public inconvenience, hardship or mischief ? These and other relevant considerations must be carefully borne in mind whenever this Court is called upon to exercise its jurisdiction to review and revise its earlier decisions. These considerations become still more significant when the earlier decision happens to be unanimous decision of Bc;nch of five learned Judges of this Court.

It is true that in the case of the Bengal Immunity Company Ltd. v. The State of Bihar & Ors. ([1 ]) this Court by majority of 4 : 3 reversed its earlier majority decision ( 4 : 1) in the State of Bombay and Another v. The United Motors (India) Ltd. and Ors. ( [2]); but that course was adopted by the majority of Judges in that case, because they were persuaded to take the view that there were several circumstances which made it necessary to adopt that course.

(I) [19SS] 2 S.C.R. 603.

On the other hand, dealing with similar problem in the cne of Sajjan Singh etc. v. The State of Rajasthan etc.('), this Court unanimously rejected the request made on behaH of the petitioners that its earlier decision in Sri Sankari Prasad Singh Deo v. The Union of India and State of Bihar([2 ]) shoi.ild be reviewed and revised. Hidayatullah and Mudholkar, JJ. who were somewhat impressed by some of the pleas made in support of the contention that the earlier decision should be revised, in substance agreed with the ultimate decision of the Court that no case had been made out for review or revision of the said earlier decision. The principle of stare decisis, no doubt, cannot be pressed into service in cases where the jurisdiction of this Court to reconsider and revise its earlier decisions is invoked; but nevertheless, the normal principle that judgments pronounced by this Court would be final, cannot be ignored, and unless considerations of substantial and compelling character make it necessary to do so, this Court should and would be reluctant to review and revise its earlier decisions. That, broadly stated, is the approach which we propose to adopt in dealing with the point made by the learned Attorney-General that the earlier decisions of this Court in the New J ehangir Mills(') case, and the Pet/ad Co. Ltd.(') case should be recon-sidered and revised.

Let us then consider the question of construing s. 66( 4) of the Act. Before we do so, it is necessary to read sub-section (1), (2) and (4) of s. 66. Section 66(1) reads thus:-

"Within sixty days of the date upon which he is served with notice of an order under sub-section ( 4) of section 3 3, the assessee or the Commissioner may, by application in the prescribed form, accompanied where application is made by the assessee by fee of one hundred rupees, require the appellate Tribunal to refer to the High Court any question of law arising out of such or\ler, and the Appellate Tribunal shall within ninety days of the receipt of such application draw up state-ment of the case and refer it to the High Court".

There is proviso to this sub-section wluch is not relevant for our purpose. Section 66(2) reads thus :

"If on any application being made under sub-section (1), the Appellate Tribunal refuses to state the

(I) [1965] I S.C.R. 933.

(2) [1952) S.C.R. 89.

(3) [1960] I S.C.R. 249.

(4) (1963] SuPI>. 1 S.C.It. 87!.

case on the ground that no question of law arises the ~ee .or the Commissioner, as the case may be, :nay, ~thin si:r months from the date on which he is served with ~ot1ce of the ref~sa!, ~pply to the High Court, and the High Court may, if 1t 1s not satisfied of the correct-ness_ of the decision of the Appellate .Tribunal, require the Appellate Tribunal to state the case and to refer it an~ on receipt of any such requisition the Appellat~ Tnbunal shall state the case and refer it accordingly".

That takes us to sub-section ( 4) which reads thus :-

"If the High Court is not satisfied that the statements in case referred under this section are sufficient to en-able it to determine the question raised thereby, the Court may refer the case back to the Appellate Tribunal to make such additions thereto or alterations therein as the Court may direct in that behalf'.

'Section 66(5) provides that the High Court upon hearing of any such case shall decide the questions of law raised thereby and shall -deliver its judgment thereon containing the grounds on which such decision is founded and shall send copy of such judgment to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case confonnably to such judgment.

It is clear that when the Tribunal draws up statement of the case and refers question of law to the High Court under ~. -66( 1), the said question must arise out of its order, and the statement of the case would _necessarily be limited to the state-ment of facts already bro.ught on the record _either before the Income-tax Officer or before the Appellate Assistant Commis-sioner, or before the Tribunal There is no doubt and indeed no dispute before us that the question of law must arise from the Tribunal's order and the statement of the case must be confined to the facts already brought on the record. The same would be the position where the High Court requires the Tribunal to state the case and refer to it under s. 66(2). The position, therefore, is that when the High Court is exercising its advisory jurisdiction under s. 66(4), it is dealing with question of law arising from the order of the Tribunal and has to answer the said question in the light of the statement of the case submitted to it by the Tribunal. In normal course, the statement of the case would refer to facts ...elected by the Tribunal from out of the material already on the record and it is in the light of the said statement of the case that

the question has to be answered by the High Court. Thus far, there is no controversy or dispute.

Section 66(4), however, authorises the High Court to refer the case back to the Tribunal to make such additions to the statement of the case or alterations therein as the Court may direct in that behalf. This power can be exercised by the High Court if it is satisfied that the statement of the case is not sufficient to enable it to determine the question raised by it. If the High Court feels that in order to answer satisfactorily the question referred to it it is necessary to have additional material included in the state-ment of the case, the High Court can make an appropriate direction in that behalf. If the High Court is satisfied that some alterations should be made in the statement of the case to enable it to deter-mine the question satisfactorily, it can make an appropriate direc· tion in that behalf. The question is whether in issuing appro-priate directions under s. 66(4), the High Court can ask the Tribu· nal to travel outside the record and call for and collect material which is not already produced on the record. If s. 66(4) is read along with s. 66(1) and s. 66(2), it may tend to show that the power of the High Court is limited to requiring the Tribunal to add to or alter the statement of the case in the light of the material and evidence already on the record. the question that can be raised under s. 66(1) and s. 66(2) can arise only out of the order of the Tribunal and if the statement of the case required to be drawn up by the Tribunal under the said two provisions would inevitably be confined to the facts and material already on the record, it seems unlikely that s. 66(4) would authorise the High Court to direct the Tribunal to collect additional material or evidence not on the record.

The scheme of the Act appears to be that before the Income-tax Officer all the relevant and material evidence is adduced. When the matter goes before the Appellate Assistant Commissioner, he is authorised under s. 31(2) to make such further enquiry as he thinks fit, or cause further enquiry to be made by the Income-tax Officer before he disposes of the appeal filed before him. Section 31 ( 2) means that at the appellate stage additional evidence may be taken and further enquiry may be made in the discretion of the Appellate Assistant Commissioner. When the ll)atter goes before the Appellate Tribunal under s. 33, the question about the admis-sion of additional evidence is governed by Rule 29 of the Income· tax (Appellate Tribunal) Rules, 1963. This Rule provides that the parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if U Sup./65-15

the Tribunal requires any documents to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or if the Income-tax Officer has decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by · him or not specified by him, the Tribunal may allow such docu-ment to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced.

After the Tribunal has passed orders on the appeal before it, the stage is reached to take the matter by way of reference pro-ceedings before the High Court under s. 66. This scheme indicates that evidence has to be led primarily before the Income-tax Officer, though additional evidence may be led before the Appellate Assis-tant Commissioner or even before the Tribunal, subject to the provisions of s. 31(2) of the Act and Rule 29 respectively, and that means that when the Tribunal has disposed of the matter and is preparing statement of the case either under s, 66(1) or under s. 66(2), there is no scope for any further or additional evidence. When the matter goes to the High Court, it has to be dealt with on the evidence which has already been brought on the record. If the statement of the case does not refer to the relevant and material facts which are already on the record, the High Court may call for supplementary statement under s. 66( 4), but the power of the High Court under s. 66(4) can be exercised only in respect of material and evidence which has already been brought on the record.

There is another consideration which is relevant in dealing with the question about the scope and effect of the provisions contained in s. 66(4). Proceedings taken for the recovery of tax under the provisions of the Act are naturally intended to be over without unnecessary delay, and so, it is the duty of the parties, both the department and the assessee, to lead all their evidence at the stage when the matter is in charge of the Income-tax Officer. Oppor-tunity is, however, given for additional evidence bys. 31(2) and Rllle 29; but if further evidence is allowed to be taken under the directions of the High Court under s. 66(4), it is likely that tax proceedings may be prolonged interminably, and that could not be the object of the Act as it is evidenced by the relevant provi-H sions to which we have already referred. These mainly are the grounds on which the earlier decisions of this Court in the New

Jehangir Mills(') case and the Pet/ad Co. Ltd. (2) case substantially rest.

On the other hand, it must be conceded that the words used in s. 66(4) are wide enough and they may, on liberal construction, include the power to call for additional evidence by directing the Tribunal to file supplementary statement of the case. It is true that s. 66( 4) in terms does not confer such power and it may be that having regard to the scheme of s. 66(1) and (2), one would have expected specific and express terms conferring such power on the High Court in s. 66( 4) if the Legislature had intended that the High Court would be competent to call for additional evidence; but there are no terms of limitation in s. 66 ( 4), and it would be reasonably possible to construe s. 66( 4) as enabling the High Court to call for additional evidence if it is satisfied that the material in the statement of the case is not sufficient to answer satisfactorily the question raised by the statement of the case. When the High Court is dealing with the statement of the case under s. 66( 4), it is its duty to answer the question submitted to it. As has been held by this Court in Ra;kumar Mills Ltd. v. Commissioner of Income-tax, Bombay('), where the question involved is one of law and the High Court finds it difficult to answer the question owing to the unsatisfactory nature of the statement of the case submitted by the Tribunal, the proper procedure is to call for further statement of the case and then decide the question itself. The High Court would be adjuring its advisory function if it merely gives some directions and orders the Tribunal to dispose of the matter according to law and in the light of the directions given by it without referring the matter again to the High Court; and so, if the High Court finds that in order to deal with the question referred to it satisfactorily it is necessary to ascertain some relevant and material facts, it should be open to the High Court to direct the Tribunal to make .a supplementary statement containing the said material and facts. There is no provision in s. 66(4) which prevents the exercise of such power.

In some cases, the question of law referred to the High Court may have to be considered in several aspects some of which may not have been appreciated by the Tribunal. There is no doubt that if question of law is framed in general terms and in dealing with it several aspects fall to be considered, they have to be con-sidered by the High Court even though the Tribunal may not have considered them. In such case, if in dealing with some aspects (I) [1960) I S.C.R. 249. (2) (1963] Supp. I S.C.R. 871.

(3)'fl9SSl,28 I.T.R.'184.

of the matter it becomes necessary to ascertain additional facts, it would be unsatisfactory to require the High Court to answer the question without such additional facts on the ground that they have not ·been introduced on the; record already. Refusal to recognise the jurisdiction of the High Court to call for such additional evid-ence may lead to hardship in many cases, and since there are no words expressly limiting the powers of the High Court under s. 68(4), there is no reason why the said powers should receive narrow and limited construction. That is the view for which the learned Attorney-General contends.

It must be conceded that the view for which the learned Attorney-General contends is reasonably possible view, though we must hasten to add that the view which has been taken by this Court in its earlier decisions is also reasonably possible. The said earlier view has been followed by this Court on several occasions and has regulated the procedure in reference proceedings in the High Courts in this country ever since the decision of this Court in the New /ehangir Mills(') was pronounced on May 12, 1959. Besides, it is somewhat remarkable that no reported decision has been cited before us where the question about the construction of s. 66(4) was considered aqd decided in favour of the Attomey-General's contention. Having carefully weighed the pros and cons of the controversy which have been pressed before us on the present occasion, we are not satisfied that case has been made out to review and revise our decisions in the case of the New /ehangir Mills(') and the case of the Pet/ad Co. Ltd.('). That is why we think that the contention raised by Mr. Palkhivala must be upheld. In the result, the order passed by the High Court is set aside and the matter is sent back to the High Court with dir1:ction that the High Court should deal with it in the light of the two relevant decisions in the New I ehangir Mills ( [1]) and the · Petlad Co. Ltd.(').

Before we part with this appeal, however, we would like to add thait in the course of the debate in the present appeal, Rule 39 of the Income-tax (Appellate Tribunal) Rules was incidentally referred to, though neither party based any argument on it. That being so, the question as to the true scope and effect of the provisions contained in the said Rule does not fall to be considered in the present proceedings and we express no· opinion on it. There would be no order as to costs throughout.

Appeal allowed and remanded. (l) [1960] l S.C.R. ~9. (2) (190] Supp. I S,C.R. 171,